Huayi Brothers Group Ltd, one of China's largest filmmakers, plans to list its shares domestically in the fourth quarter to raise several hundred million yuan, sources familiar with the situation said on Monday.
Beijing-based Huayi has hired securities houses CITIC Securities, China's largest brokerage, and Merchants Securities to advise on the initial public offering, the first for a Chinese film studio, the sources said.
Part of the proceeds are expected to go toward expanding Huayi's theatre network across the country, which it aims to boost to 150 to 200 screens within five years, said the sources, who declined to be identified as they were not authorised to speak to the media. Huayi, which had originally planned to seek a listing on a Nasdaq-style market that China is preparing to launch for start-up companies, shifted to the country's main board markets to seek more funds, they said.
The sources did not give a specific figure for the size of Huayi's IPO as the plan had not been finalised yet. A Huayi representative could not be immediately reached for comment. "Since it will be the first film studio to list on the domestic market, you cannot make a comparison with anyone else in the market," said one of the sources, highlighting the difficulties in pricing the offering.
Huayi, established by brothers Wang Zhongjun and Wang Zhonglei in 1994, has also hired KPMG, one of the world's four largest auditing firms, as its IPO auditor. The Wang brothers hold a combined stake in Huayi of more than 50 percent. Other major investors include Tom Group Ltd, Focus Media Holding Ltd and Yahoo China.
China's first public film showing was in Shanghai in 1896. Its film industry boomed in the 1920s and 1930s, gaining popularity around Asia, but declined after the Japanese invasion and during the initial decades after the Communists took power in 1949.
In the past two decades, Chinese filmmakers have struggled to compete against Hollywood blockbusters, despite government controls on the number of foreign films entering China. Huayi has worked with Hollywood entertainment majors such as Sony Picture Entertainment Corp in the past few years to jointly invest in or produce Chinese movies, some of which target overseas audience markets. The company has solely or jointly produced more than 50 movies since 1998, including award-winning A World Without Thieves, starring Hong Kong actor Andy Lau, and The Banquet by Chinese director Feng Xiaogang.
Huayi, described by Morgan Stanley analysts in a research report last month as "China's Warner Bros for tomorrow" because of its potential in the booming market, holds about a 40 percent market share in domestic movie production and 30 percent in movie distribution, according to Chinese media reports.
Huayi also runs a variety of other businesses including music recording and agent services for artists. Huayi's bigger rival, state-owned China Film Group, also plans to list part of its assets on the domestic stock market after winning initial approval from the government early this year, but it faces a lengthy restructuring process before it can go public.
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